Tuesday, December 13, 2005

Another rate hike

Well, this one was expected and the stock market rallied on the news. Now it's the time when everyone start saying the rate hikes will slow down. I read this article stating that financial stocks may be a good buy because of that reason. The financials definitely had a stronger rally than most stocks. I noticed a good number of them posting strong gains late in the day. If the article is right, you may be able to find some bank stocks now that are trading on the low end of historic valuations and/or have high (and sustainable) yields. For instance, Bank of America (BAC) is yielding about 4.4%.

I'm starting to gather a list of stocks I want to look into because now I think I'll have more time. For some reason a lot of food related stocks are on my list so far. I'm also looking at a few consumer products companies and tech (I think Nokia was on the list, but that has had a big run-up). I also have a couple in mind that are small caps with low volume. I don't want to be over-weight in this sector, but I might be able to find a few.

The other thing I want to start doing is maybe (I've already pointed this out I think) buying a stock based on charts. I have my spreadsheet where I keep track of my longs/shorts. The list is made up of stocks I look through and also stocks that I send to the head trader. I try to go through the list everyday and if I don't like how the chart is shaping I'll "sell" it by putting a dash next to the name. Then I don't keep track of the price anymore. My Long list is doing rather well, with a straight average gain of over 9% since the end of October. The better part is that my profitable "trades" are over 90%. This is mainly due because I started the majority of the list right before the rally. My short list is okay compared to the market. I would expect to be down a few percent, but it's only down about half a percent. So maybe I'll take a chance and buy a stock every now and then with a shorter time-frame. The risky part is that I won't be able to look deeper into the stock till after I buy it, but it might be a risk worth taking.

One last note: my first options trade resulted in a 1% gain in three days. This was basically my goal, but I haven't made another one yet. I'm re-defining my game plan and reading more on option strategies. I'm currently getting through Options as a Strategic Investment, which is an excellent book.